Expedia, after selling its stake in eLong last year, is re-building its presence in China. So how is the group charting their map in China?
ChinaTravelNews, Ritesh Gupta – China, as a travel market, might not really be an enigma anymore for foreign players. Established online intermediaries have fittingly chosen the collaborative path, cooperating with local entities, to be a part of the overall travel e-commerce pie.
But as simple as it may sound, a foreign brand’s business strategy can go awry in no time if it one doesn’t respond to the fast-evolving consumer behavior or even keep a tab on emerging business models.
Mieke De Schepper, VP Asia-Pacific at Expedia Lodging Partner Services, refers to a couple of challenges that established organizations at large still need to cope up with.
“It is of paramount importance to understand the preferences of Chinese consumers, and equally important is to find efficient ways to reach out to them via an apt marketing mix,” she says. “Then one can’t ignore the emergence of new platforms, new business models…the way market continues to evolve (with blurring of line between traffic generation and transactional platforms). This calls for constant participation to assess new avenues (for potential collaboration).”
Expedia has a two-fold approach for each and every market. Firstly, building own brands organically and secondly, partnering with strong local brands.
The group currently has tie-ups with Ctrip and eLong, the company in which it sold its stake last year.
According to sources, the possibility of eLong breaking-even, at least over the next few years, looked bleak considering the way the duel between OTAs, especially Ctrip and Qunar was shaping up. As rationalization is setting in, it is expected that the economics for OTAs would work out better. But still more than the domestic travel segment, the foreign companies are looking at the inbound Chinese market, as well as the outbound opportunity.
So going by the current status in China, there is ample opportunity in powering an established brand, but Mieke isn’t ruling out the possibility of carving a niche for Expedia as a brand in the market.
“Over a period of time, the mix (the probability of a relatively stronger contribution from the company-owned brand) can evolve. In fact, this in turn can pave way for deeper insights which can eventually benefit our partners as well,” says Mieke.
Expedia has taken a “global plus regional plus local” approach to running operations here. In 2015, Expedia spent over US$750 million in technology globally – likely to be the most in the travel industry. As a technology company in the business of travel, Expedia also recognizes that travel is a very much a relationship business. “We are in the business of returning the perfect search results for travel. At the same time, you need people to shake hands (with hoteliers and other suppliers) and know the (hotel) owner personally and know when their kids’ birthdays are. That’s the kind of relationship which the travel industry demands and we are investing in building those personal relationships now. In fact, in China, we have increased our Market Management team by almost 50% year-on-year,” she adds.
Online travel business is undergoing a change, the way traffic is being converted. For instance, one of the recent highlights has been TripAdvisor tying up with hotels and OTAs. So what about China, considering the fact the market has excelled in setting up its own platforms – social networking sites, micro-blogging, a multi-faceted app like WeChat which today even facilitates transactions, wallets such as Alipay etc.
“This (China) market is super-interesting,” says Mieke, referring to the blend of technology and the resulting usage of the same by consumers.
But is there is lack of innovation among Chinese platforms when it comes to monetizing traffic in the travel domain, considering the way dynamics are evolving in travel e-commerce globally?
Mieke doesn’t agree, and asserts that China has its own distinctive way of crafting applications and tools, something that is not always relevant for non-Chinese markets. “If you see Chinese consumers using mobile handsets, you see them “talking” to them – considering the heavy usage of voice-based interaction, rather than users in other markets where one tends to opt for “texting”,” points out Mieke. She says the voice-based search feature, along with the option of drop-down menu, has been specially tailored for hotels.com mobile app in China.
There are several aspects that Expedia is looking at the considering that Expedia.cn is relatively young as a venture as over the years the group was eyeing this market via eLong. Though Mieke didn’t share details about operations, the team is looking at optimizing marketing mix, looking at new payment options other than Alipay and also sharpening hotel content via contracting as well as tie-ups with local OTAs.
“We are also looking at strengthening our domestic inventory, and working closely with our partners – Ctrip and eLong.” So isn’t there a conflict at any level when OTAs are collaborating with each other? Not really, says Mieke. “The market is huge, wide-spread. So the objective is to ensure we extend our reach via partnerships and also gradually solidify our brand to complement our objective of targeting outbound market.”
As for targeting Chinese travelers, she also mentioned that Expedia would continue to leverage its global richness in inventory, technology investment (such as matching the profile of the visitors with the sort of product they are likely to be interested in be it for the PC site or its mobile app, ensuring the users come across a streamlined booking process – easy and engaging booking flow to find right destination, right product) and marketing reach, an area that is perhaps the most challenging aspect.
As for payments, it is often highlighted that there are hotels in China, barring 25000-30000 hotels that have a star rating, may not be equipped to support credit card payments. Mieke mentioned that the industry is a lot more flexible – consumers can use their credit cards and pay Expedia or they can also pay at the property, indicating that Expedia isn’t really sticking to just the agency or the commission model. Also, the likes of WeChat and Alipay might have their roots in China, but the apps are popular outside China, too, and can be useful for inbound segment, too. This can help in targeting Chinese-speaking users based in other nations, in addition to the diaspora of Chinese natives across the globe.
So, as of now, Expedia is counting on leveraging its global scale. “Being successful in one country and establishing operations at a global level isn’t same,” she said, referring to the limitations of Chinese OTAs when it comes to spreading their wings beyond the domestic market.
Overall foreign OTAs have found their way into China via collaboration, but it would be interesting to see if 2016 can result in any meaningful foray as an independent, domestic brand.